In a bid to support federal antitrust enforcers who have been probing the health-care sector, states are taking measures to pass laws requiring hospitals and other health-care providers to inform them of smaller mergers or acquisitions. Federal Trade Commission (FTC) officials and health policy researchers have found that health-care consolidation leads to escalated medical costs and dilutes the quality of patient care.
The American Hospital Association reported nearly 2,000 hospital mergers between 1998 and 2021. In response, states like California, Minnesota, Illinois, and Indiana have enacted laws in the last year demanding health-care entities to notify state authorities prior to concluding a merger or acquisition. Many of these laws empower state agencies to review and contest deals that are below the $119.5 million Hart-Scott-Rodino limit for reporting proposed transactions to federal antitrust agencies.
The FTC and state attorneys general have pointed out that expanding state legislation can fill voids created by federal antitrust enforcement in the health-care sector. States are strengthening their abilities to scrutinize healthcare transactions, a move applauded by Gwendolyn Cooley, Wisconsin assistant attorney general for antitrust, who highlighted the FTC cannot take on these tasks singlehandedly.
Nonprofit merger review statutes have been around for some time, but the National Association of Attorneys General Multistate Antitrust Task Force chair, Gwendolyn Cooley, noted that the inclusion of all hospital transactions in the review, particularly in states with Democratic attorneys general, is a recent and rapidly increasing phenomenon. Indiana made history as the first Republican-led state to enact similar laws when Governor Eric Holcomb signed a bill into law, providing for a review of health-care transactions.
State policymakers are striving to identify loopholes and preserve the dwindling competitive landscape in the marketplace, according to Natasha Murphy, director of health policy at the Center for American Progress. However, Aaron Wesolowski, vice president of research and strategy at the American Hospital Association, argues mergers and acquisitions can enhance access to care, maintaining hospitals and reducing healthcare costs.
Minnesota, leading the charge, passed a legislation in 2023 mandating all healthcare entities to report proposed transactions to the state’s commissioner of health and its attorney general. The law has already been used to challenge hospital mergers on grounds of potential harm to the public interest. Notably, providers Marshfield Clinic Health System and Essentia Health abandoned their merger plans due to the investigation under this law.
Alongside the state focus on hospital transactions, there is an escalating interest in the role of private equity in healthcare consolidation. Regulators are closely examining ‘roll-ups’, a phenomenon where a private equity firm gains initial acquisition before proceeding to acquire numerous businesses in the same sector. California is notably zooming in on private equity, with Attorney General Rob Bonta introducing a bill aimed at strengthening state review of these transactions.
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